IT IS seemingly good news for the Malaysian automotive industry that DRB-Hicom and Volkswagen (VW) have signed an MOU to collaborate on the assembly and manufacture of several models, including the Golf 1.4, Passat 1.8 and 2.0, and the Polo 1.2, at the Pekan plant in Pahang.

This is one of the few bright spots in the Malaysian car industry since the Asian financial crisis in 1998, and VWís planned investment supports the theory that our big hope for growth lies in non-Japanese car makers.

VWís announcement comes after Peugeotís commitment with the Naza Group to make Malaysia its regional automotive hub for right-hand drive vehicles.

Another big hope rests on the South Korean car industry.

They too want a regional automotive base.

Malaysia is their biggest market in this region and from most reports, they would like to set up shop here but they have their reservations.

And can we blame them?

For as long as Malaysia practices a discriminatory tax regime where national cars are favoured and non-national cars penalised, itís going to be doomed to a small market that grows at an organic rate.

How many units of the Pekan assembled Golf 1.4 will be sold if the price is RM120,000?

And for that matter, how many units of the Pekan assembled Passat 2.0 will be sold if the price is RM200,000?

Those are the kinds of pricing levels that are being discussed at the moment.

We can understand that the government derives a lot of revenue from taxes on cars and is loath to relinquish this.

On the other hand, if the market size is increased from Malaysia's 24 million population to 400+ million of the combined populations of Indonesia, Philippines and Thailand, chances are that the Malaysian automotive industry will experience double digit growth. The tax base will also increase.

The achievements of the private sector like DRB-Hicom and the Naza Group in bringing in big automotive groups has to be reciprocated by the government in liberalising the Malaysian automotive market.

The trade barriers must be lifted so that the Thais and the Indonesians can sell their cars in Malaysia in the spirit of the Asean Free Trade Agreement.

Unless we open up, our neighbours will not open up their markets to our products.

The taxes imposed to protect the local assembly industry have outlived their purpose, like the steps taken to protect the national car industry.

Malaysian car makers and assemblers can compete regionally if they are given the opportunity to do so.

Just give the private sector the chance to compete in a regional market.

As it is now, the national car makers, especially Perodua, are merely reaping the benefits of a protected market.

If the national agenda is to grow the manufacturing industry, then the decision must eventually be taken, sooner rather than later, to lessen car taxes but to broaden the base so that the quantum of revenue is maintained.